Australian Broker 17.03

FEBRUARY 2020 ISSUE 17.03

TIM LAWLESS AND MARTIN NORTH CoreLogic’s Tim Lawless and Martin North from Digital Finance Analytics go head to head to bust the myths of the housing market /14 ALSO IN THIS ISSUE… CBA promises faster lending decisions New app offers small businesses faster access to funding /12 A big deal Amy Small learns that brokers can help even the most bank-savvy clients /22 Banks with happiest customers Data reveals value of new home loan commitments and more /4

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Primed for change Campbell Smyth refl ects on Bluestone’s recent milestones /18

Home lending trends for 2020 Australian Broker examines the key housing trends for the year ahead /20

In the hot seat Mark Middleton discusses top survival tips for working in fi nance /30

17/02/2020 2:24:09 PM

NEWS Lenders Banks with happiest home loan customers revealed /04

IN THIS SECTION

Associations Serviceability no longer biggest concern, says HIA /06

Technology New CBA app promises faster lending decisions /10

Market The state of housing across Australia /08

www.brokernews.com.au FEBRUARY 2O20

Regulators First home buyer scheme off to a running start /12

EDITORIAL

SALES & MARKETING

Editor Victoria Ticha

Sales Manager Simon Kerslake

News Editor Madison Utley

Global Head of Communications Adrijana Monevska

Production Editor Roslyn Meredith

DATES TO WATCH

Upcoming can’t-miss events

ART & PRODUCTION Designer Jommel Ramos

24-27 FEBRUARY

27-28 FEBRUARY

2-3 MARCH

Women in Banking & Financial Services Leadership Summit

Australian Mortgage Innovation Summit 2019

Responsible Lending and Borrowing Summit

The ninth iteration of the summit will take place in Sydney at the Radisson Blu Plaza Hotel. The event will address how to effectively lead when faced with change and adversity, with a particular emphasis on how to position oneself for success in the wake of the royal commission.

RFi Group will be hosting the 10th annual summit in Sydney, covering everything from the aftermath of the royal commission to the “visibly turning” credit cycle. In addition to the two days focused on innovation and efficiency, the group will be holding its Australian Lending Awards.

To be held at the Radisson Blu Plaza Hotel in Sydney, Informa’s fourth responsible lending summit includes addresses by ASIC exec Tim Gough and Mortgage Choice CEO Susan Mitchell. Along with the other speakers, they will shed light on open banking’s impact on financial services and the industry’s recalibration following the royal commission.

Production Manager Alicia Chin Traffic Coordinator Kristine Jamir

CORPORATE Chief Executive Officer Mike Shipley Chief Operating Officer George Walmsley Managing Director Justin Kennedy Publisher Simon Kerslake Chief Information Officer Colin Chan Human Resources Manager Julia Bookallil

EDITORIAL ENQUIRIES

Madison Utley +61 2 8437 4700 madison.utley@keymedia.com

SUBSCRIPTION ENQUIRIES

12 MARCH

18-19 MARCH

25–26 MARCH

Connective’s first PD Day for 2020

Financial Inclusion Conference

ASIC Annual Forum 2020

At this event you will hear from Connective on the latest industry updates, including Mark Haron, Connective director, and Daniel Oh, Connective group legal counsel, on the best interests duty and how it could impact your business. Attend and earn four CPD points. The event will be held at the Royal Randwick racecourse in Sydney.

The fourth edition of this event, dubbed ‘Roads to Resilience’, will be held in Sydney and aims to engage the community sector, government and peak organisations in working towards a more financially inclusive future for Australians. Conference content will address the building blocks of financial resilience for consumers.

ASIC’s annual forum is a long-standing key event for participants in the financial services and markets sectors.

This year’s speakers include Attracta Lagan, co-principal at Managing Values; Paul Harrison, deputy director at Deakin Business School; and Nicolette Rubinsztein, non-executive director at Zurich Australia.

tel: +61 2 8311 5831 fax: +61 2 9439 4599 subscriptions@keymedia.com.au

ADVERTISING ENQUIRIES

Simon Kerslake +61 2 8437 4786 simon.kerslake@keymedia.com.au Key Media Pty Ltd Regional head office, Level 1O, 1–9 Chandos St, St Leonards, NSW 2065, Australia tel: +61 2 8437 4700 fax: +61 2 9439 4599 www.keymedia.com Offices in Sydney, Auckland, Denver, London, Toronto, Manila, Singapore, Seoul

30-31 MARCH

7 M AY

05-06 NOVEMBER

AFR Banking & Wealth Summit

Banking Summit Sydney

Future of Financial Services Conference

Banking and wealth leaders, regulators, policymakers and stakeholder groups will gather to debate the future of financial services at the Sofitel Wentworth in Sydney. The 2020 summit will provide the opportunity to hear from “key industry leaders” during the implementation stages of many royal commission recommendations.

To be held at Doltone House, Hyde Park, this event brings together over 100 chiefs and divisional heads from Australia’s largest banks and financial services organisations to share insights on industry trends and emerging technologies that will change the face of the industry in the coming years.

ST Media’s flagship event and the largest of its kind in the southern hemisphere, Future of Financial Services will set the digital agenda for 2021 and beyond. It will examine open banking, customer experience, AI and machine learning, data analytics, digital transformation, the emergence of neobanks, and much more. It will be held at the ICC Sydney Exhibition Centre.

This magazine is printed on paper produced from 1OO% sustainable forestry, grown and managed specifically for the paper pulp industry Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor. Contributions are invited, but copies of work should be kept, as Australian Broker magazine can accept no responsibility for loss. Australian Broker is the most-often read industry publication, according to independent research carried out by the Ehrenberg-Bass Institute for Marketing Science at the University of South Australia in December 2008. The research also found that brokers rate Australian Broker as the best for both news content and feature articles, followed by sister publication MPA. Overall, on all categories, Australian Broker ranks top followed by MPA. The results were based on a sample of 405 respondents who were the subject of telephone interviews.

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Let’s chat. 13 11 33 Approved applicants only. Lending criteria apply. Other fees and charges are payable. Liberty Financial Pty Ltd ABN 55 077 248 983. Australian Credit Licence 286596.

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17/02/2020 2:28:42 PM

NEWS

LENDERS FAST WELCOMES NEOBANK TO LENDER PANEL

VV10 BANKS FOR HOME LOAN CUSTOMER SATISFACTION TOP Source: Roy Morgan

has welcomed Judo Bank to its panel to reinforce its commitment to helping brokers meet their business clients’ needs, according to the aggregator’s head of NSW/ACT and Qld, Rob Ryan. “We are continuing to expand our lender panel to meet the diversified and specialised needs of our brokers and their clients,” Ryan said. “The addition of Judo Bank further enhances our brokers’ offering as business customers increasingly demand lenders to be more agile and service focused.”

91.4%

FAST

83.3% 77.1%

MORTGAGEPORT NOW WORKING WITH BROKERS only non-ADI on the panel of THE lenders chosen to participate in the government’s First Home Loan Deposit Scheme, Mortgageport has announced plans to distribute the loans through mortgage brokers as part of its broader efforts to establish a third party channel.

Mortgageport said this was its “first step” towards partnering with brokers looking to grow their businesses. The lender plans to accredit brokers directly instead of offering the product through mortgage aggregators, in order to build “closer relationships” with brokers.

“Not that long ago, it would have been difficult to believe that online lending institutions would be able to compete with, let alone beat, traditional lenders” Michele Levine CEO, Roy Morgan

4

89.3%

ME Bank

ING

Bendigo Bank

Bankwest

75.8%

St George

73.3% 72.6%

CBA

Suncorp

BANKS WITH HAPPIEST HOME LOAN CUSTOMERS REVEALED The top 10 banks that are delivering to home loan customers have been revealed, and the data shows non-majors are outperforming traditional banks from Roy Morgan’s survey of 50,000 Australians has revealed that customers are significantly happier with the mortgage experience provided by by non-major banks as compared to that offered by the big four.

Roy Morgan has released two lists: the 10 institutions with the highest satisfaction levels among its mortgage holders, and the 10 institutions with the highest satisfaction levels across its non-home loan customers.

The majors didn’t make it into the top five of either.

ME Bank came out on top of the top 10 lenders when rated by home loan customers, followed by ING, Bendigo Bank, Bankwest, St George, CBA, Suncorp, ANZ, Westpac and then NAB. For non-home loan customers, DATA

the order varied slightly, with ING sitting atop the list followed by Bendigo, ME, Suncorp, Bankwest, CBA, St. George, ANZ, NAB, and then Westpac.

Suncorp showed the largest discrepancy between the two categories, with mortgage holders rating the bank more than 8% points below the score given by non-home loan customers.

It has been well over a decade since Australia’s non-bank lenders first arrived on the scene, and they have been hardy battlers ever since. A business lending index report by NAB-owned mortgage aggregator FAST last year found that the big four banks and their subsidiaries had suffered a 10 percentage point drop in market share of business lending and equipment

72.1%

ANZ

70.4% 70.3%

Westpac

NAB

finance in the 2019 financial year.

Indeed, Roy Morgan CEO Michele Levine said “it’s clear” that smaller lenders have surpassed traditional institutions as the leaders in customer satisfaction.

“Not that long ago, it would have been difficult to believe that online lending institutions would be able to compete with, let alone beat, traditional lenders – which had branches situated all over the country – but that is exactly what’s happened,” she said.

“First, as people’s lives continue to shift online, there is growing acceptance of not being able to visit a bricks-and-mortar branch, and therefore decreasing dissatisfaction associated with that.

“Second, the lower overheads associated with an online business allow such institutions to offer additional services and attractive interest rates.

“A third key factor is the closure of branches by the major banks.

APRA reports that the major banks closed 500 branches in 2018/19 alone.”

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Helping Brokers open doors.

Westpac is listening to what Brokers need and are making changes to help you open more doors. Visit us online to check out our initiatives for Brokers or talk to a BDM.

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NEWS

A S S O C I AT I O N S RBA ANNOUNCES FIRST CASH RATE OF 2020 cash rate has been kept on hold at its current record low of 0.75%, where it has sat since October 2019. Following the release of the latest data, which showed a lowered unemployment rate and an uptick in the inflation rate, the outcome of the RBA’s February meeting was generally expected.

Regardless, brokers should still anticipate a rise in market activity, says Loan Market executive chairman Sam White.

THE

SERVICEABILITY NO LONGER THE BIGGEST CONCERN Many barriers still stand in the way of first home buyers obtaining finance, says the Housing Industry Association’s chief economist Housing Industry Assocation has used the release of its affordability index to highlight the many barriers that stand in the way of first home buyers obtaining finance.

While the index showed that the ratio between income levels and the cost of mortgage repayments compared favourably with “much of the last 20 years”, HIA chief economist Tim Reardon explained that serviceability was no longer the most pressing concern in a borrower’s home loan journey.

He said, “Servicing a mortgage is not the constraint on homeownership that it has been in the past. The sticking point facing the current generation of THE

aspiring homebuyers in obtaining a mortgage in the first place – this relates to the lengthening of the time it takes to save a deposit, and then meeting the increasingly stringent requirements of lenders.

“The tightening regulatory environment the banking sector has faced over the last decade has forced lenders to eliminate much of the flexibility in the mortgage market that made homeownership accessible for first home buyers.”

Structural changes in the banking sector have meant that even if a first home buyer has sufficient income to meet serviceability requirements, they often borrow a high proportion of

the property value and closer to their capacity, which leads them to be considered a higher risk.

“Through a decade of financial sector reforms, banks have been required to increase the value of assets they hold when lending for the types of home loans typically used by first home buyers, [making] it increasingly expensive to lend to first home buyers,” said Reardon.

“Tighter scrutiny of household budgets and measures imposed to restrict interest-only loans apply on top of these changes. This is having the effect of forcing first home buyers to achieve a deposit of greater than 10%.”

A decade ago, in 2009, lending to homebuyers with a deposit of less than 10% of the property value comprised over 20% of new lending. Now, it accounts for just 7% of new loans.

“Reducing risk of lending to first home buyers comes at a cost, and that is the decline in homeownership,” Reardon said.

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APRA TO SHARE MORE MORTGAGE DATA has announced it will expand its quarterly property data publication to include “new and more detailed statistics” on residential mortgage lending. The change will not only contribute to APRA’s goal of becoming a more transparent regulator but is intended to enable “more in-depth market analysis” by analysts, media and other interested parties. Consultation will also continue on a proposal for its data sources to become non-confidential.

APRA

“Reducing the risk of lending to first home buyers comes at a cost, and that is the decline in homeownership” Tim Reardon, Chief economist, HIA

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17/02/2020 2:32:31 PM

New bank criteria left you high & dry?

La Trobe Financial offers common sense lending solutions to clients who may not qualify at a bank.

Our personal approach to assessment means we can be more open to your customers’ needs.

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To view our ratings and awards please visit our Awards and Ratings page on our website. This publication is for accredited broker use only and is not for distribution to consumers. Copyright 2019 La Trobe Financial Services Pty Ltd ACN 006 479 527. All rights reserved. No portion of this may be reproduced, copied, or in any way reused without written permission from La Trobe Financial.

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17/02/2020 2:33:22 PM

NEWS

MARKET CUSTOMERS INVEST $100M IN NEOBANK under three weeks, a challenger bank has seen 15,000 customers make $100m in deposits, “smashing its business plan many times over”. Xinja Bank launched its new digital bank account Stash on 15 January with an ongoing interest rate of 2.25% from the first dollar invested up to a maximum of $245k.

Xinja CEO and founder Eric Wilson said the staggering figure showed that consumers were not only willing but excited by “the opportunity to embrace the digital banking revolution”.

IN

THE SME FINANCE TREND TO WATCH chain finance will become the “funding model of choice” for the majority of SMEs over the next five years, and the reverse factoring model should be used responsibly as a stimulus for the SME sector, Fifo Capital has said.

“Reverse factoring works at its best when the supplier uses it at chosen times to fund growth and invest so the burden and benefit of liquidity can be shared throughout the supply chain,” said CEO Wayne Morris.

SUPPLY

“Reverse factoring works at its best when the supplier uses it at chosen times to fund growth and invest” Wayne Morris CEO, Fifo Capital

OVERVIEW: THE STATE OF HOUSING ACROSS AUSTRALIA The latest research reveals how the Australian housing market has performed over the last few decades has released its latest quarterly report, which compares recent housing data with decade averages – or the ‘normal’ performance – for each state and territory.

In six of the states and territories, as compared to four previously, trend housing finance commitments came in above decade averages. Additionally, in all states or territories with the exception of the NT, trend home loans were above the levels of one year ago.

The ACT remains in the top spot, with the value of home loans up by 33.8% on the long-term average. Next strongest is Tasmania, up 33% on decade averages, followed by NSW, up COMMSEC

32.3%, and Victoria, up 31.1%.

The NT remains the weakest for housing finance, with trend commitments 36% lower than the decade average.

Commitments in WA were down 16.2% on the decade average, followed by Queensland, up 14.6%, and SA, up 19.1%.

In terms of annual comparisons, NSW housing finance commitments were up the most at 17.2%, while Victoria was up 12.3%.

The NT had the weakest annual comparison, with trend home loan commitments down 16.2% on a year ago. Next came the ACT, which was up 0.8%.

Home-building figures were strong in Tasmania, with population growth being well

above ‘normal’ and the building industry struggling to keep up with the demand for homes.

This kept Tasmania in the top spot for dwelling starts, ahead of Victoria and NSW. In trend terms, dwelling starts in Tasmania were 10.3% above decade averages, making it the only state or territory with starts above the decade average.

Victoria took second place, with starts down 5.2% on decade averages, while NSW was down 6.2% and the ACT 6.4%.

Overall, considering all eight key indicators of economic growth that CommSec analyses in its research – retail spending, equipment investment, unemployment, construction work, population growth, housing finance and dwelling commencements – Victoria remained the bestperforming economy.

Tasmania claimed the second spot, with NSW close behind.

Separated by a wider margin, ACT came in fourth.

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17/02/2020 2:34:14 PM

TECHNOLOGY UPDATE

TECHNOLOGY DRIVING ENTREPRENEURIAL GROWTH FOR AYERS FINANCIAL GROUP a 40% year-over-year increase in settlement volume, Ayers Financial Group is on an impressive growth trajectory. According to Mark Lai, Ayers Financial Group’s Head of Operations, a laser focus on driving service excellence in its core market by leveraging cuttingedge technology is the ‘secret sauce’ for this multi-awardwinning brokerage’s success.

“We’re still a small group, but we’re fast-growing and dynamic,” says Lai. “Because we’re still a young operation we’ve been able to concentrate on implementing technological elements into our business operations, and streamlining the process so that we can capitalise on our online presence and ensure compliance is met.

“Our growth has been largely due to word of mouth, specifically within the Australian-Asian community, with whom we work very closely.”

Lai notes that many of Ayers Financial Group’s clients are high-net-worth professionals who expect and demand outstanding service and a fast, glitchfree operation. So maximum efficiencies at point of sale and in back-office operations, along with the guarantee that supplied information is stored in a secure manner, are paramount.

“NextGen.Net’s ApplyOnline platform is the gateway to all our submissions,” Lai says.

“ApplyOnline has always been the leading gateway for brokers to submit their applications to lenders. So it was very natural for us to choose it as our core electronic lodgement platform.

“Our mortgage support team loves ApplyOnline because it indexes all the documents and makes it the fastest and most efficient way for lenders to receive supporting documents.”

He deems the new version of the ApplyOnline ‘Supporting WITH

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Documents’ service a winner, saying, “We love the drag-anddrop feature where we can upload multiple documents at once but still have the option to go into a specific folder to upload any individual file.”

He adds that the Supporting Documents service “reminds brokers to tick off each lender’s requirements and minimises the delay in credit assessment”.

One of Lai’s principal initiatives is achieving a paperless office.

“Our office has been adapting to the paperless model since the start of 2019 and already we’ve reduced our paper usage by over 50%,” he declares.

“We use platforms like Salestrekker, which is our CRM; CashDeck, which retrieves bank statements from clients; and DocuSign, which allows brokers and clients to provide e-signatures on documents.

“It’s working well. It’s good for the environment and efficient for our brokers as ApplyOnline integrates directly with Salestrekker and DocuSign through the ApplyOnline ‘eSign’ tool.

“ApplyOnline Supporting Docs is exactly how a paperless office should work,” Lai says.

“Traditionally the method was to retrieve documents from clients, print them out and put them back into the computer. Instead we now get the documents from the client, ensure they’re legible, review them and then upload them to ApplyOnline.”

He laughs when asked if he’s encountered any resistance to his paperless office initiative.

“Definitely! That’s human nature, but I tell the team that just because we’ve always done things a certain way doesn’t mean that it’s the right way. We need to have an open mind if we want to succeed.”

Success for Ayers Financial Group is about “empowering both brokers and clients

Mark Lai, Head of Operations, Ayers Financial Group

“Technology enables us to level the playing field and deliver on our customer service excellence promise…” to achieve more thorough education, and recognising which lender has their best interest at heart”.

“Our key goal for this year is to increase our distribution team by attracting more experienced finance brokers and mentoring new entrants in the industry,” Lai says.

“We will also be looking to introduce our white label products to the consumer market, which means it’s a very exciting year ahead of us.

“Our medium-term goal is to become a fully licensed financial service firm offering a broader range of financial

products to both individual and corporate clients.”

Lai sees technology such as the ApplyOnline platform playing a crucial role in growing Ayers Financial Group’s business.

He says, “Technology will continue to grow and become more competitive as new neo-lenders emerge in the financial services industry.

“So, we (as a small business) have to continue to innovate and step up our game; and technology enables us to level the playing field and deliver on our customer service excellence promise with maximum efficiency and effectiveness.”

17/02/2020 2:34:48 PM

NEWS

R E G U L AT O R S EARLIEST DATA FROM FHB SCHEME National Housing Finance and Investment Corporation (NHFIC) has shared the earliest data available from the First Home Loan Deposit Scheme’s first month of operation. The preliminary figures provide insight into the specific types of borrowers benefiting from the initiative. The NHFIC said the first 3,000 homebuyers with pre-approvals under the scheme had been distributed through every state and territory and divided among capital cities, large regional centres and regional areas.

THE

NEW ATO RULES WILL PUSH SMES TO PAY TAX DEBTS using the ATO “as a bank” by not paying tax commitments on time face new risks, national business funder Scottish Pacific has warned.

Many business owners are still unaware of laws passed late last year that would allow the ATO to reveal SMEs’ tax debts to credit reporting bureaus, according to Scottish Pacific senior executive Wayne Smith. He said trusted advisers, accountants and brokers played a key role in making business owners aware of the implications.

SMES

NEW LEGISLATION ‘TARGETS MISCONDUCT’

BY MORTGAGE BROKERS Draft legislation will address compliance concerns and enforce the requirement for doing background checks on prospective brokers and advisers government has released the draft legislation implementing 22 recommendations and two additional commitments that arose from the Hayne Royal Commission. These include recommendations 1.6 and 2.7, which establish a compulsory scheme for checking references of prospective financial advisers and mortgage brokers.

Before the royal commission began, under ASIC’s Regulatory Guide 104 both Australian financial services licensees and Australian credit licensees were meant to undertake appropriate background checks before appointing new representatives, through referee reports, searches of ASIC’s register of banned and disqualified persons, or police checks.

THE

However, despite this requirement’s existence, the royal commission found that financial services licensees weren’t doing enough to communicate the backgrounds of prospective employees among themselves, highlighting that licensees “frequently fail to respond adequately to requests for references regarding their previous employees” and do not “always take the information they receive seriously enough”.

Financial advisers facing disciplinary action from an employer were therefore able to simply leave and find another to employ them.

Recommendations 1.6 and 2.7 seek to address this systemic weakness. The latter looks to promote better information

sharing about the performance history of financial advisers, focusing on compliance, risk management and advice quality, while the former makes sure this change is extended to mortgage brokers as well.

According to the draft legislation, the reporting obligation “targets misconduct by and serious compliance concerns about individual mortgage brokers” and “recognises that in the industry, other parties such as lenders and aggregators are often well positioned to identify this misconduct”.

The new law states that both Australian financial services licensees and Australian credit licensees are subject to a specific obligation to undertake reference checking and information sharing regarding a former, current or prospective employee. Australian financial services licensees and credit licensees who fail to undertake reference checking and information sharing regarding a prospective employee will be subject to a civil penalty.

“Brokers who are assisting customers with accessing scheme-backed loans will need to consider accreditation with a number of lenders” Glen Spratt Managing director, Mortgageport

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17/02/2020 2:36:25 PM 16/10/2017 2:07:04 PM

NEWS

TECHNOLOGY

ACCC FORMALISES OPEN BANKING RULES ACCC has formally released the Competition and Consumer (Consumer Data Right) Rules. This has been heralded as a “key development” in integrating CDR into banking. In addition to legally requiring the four major banks to share product reference data with accredited recipients, the rules clarify the parameters of the new system and give “legislative force” to the obligations in banking that become mandatory from 1 July 2020, detailing the rights, responsibilities and possible penalties for all parties involved.

THE

CBA LAUNCHES APP FOR FASTER LENDING DECISIONS CBA’s updates and new initiatives for its small business banking division include a commitment to providing faster access to funding than 93,000 existing CBA business customers have already made the switch to the bank’s new business account offering zero monthly account fees, and over 27,000 new accounts have been opened.

“Our small business customers have wanted more from us and we’ve been working hard to make the improvements they’ve asked for – like faster access to cash flow, more specialist bankers, and fewer fees,” said Clive van Horen, executive general manager of business customer solutions.

“Small businesses are often the first to feel the pinch from shifts in the broader economy. As MORE

Australia’s largest bank, it is imperative we listen to these businesses, back them, and try to make it easier for them to innovate, invest and grow.”

As part of this effort, CBA has created more than 120 new staff roles, with a larger pool of business bankers in its Australian phonebased business centres and more managers in branches in “key geographic areas”.

The bank has also launched BizExpress, a business lending application that provides small businesses with faster lending decisions and faster funding for loans up to $1m.

“We fully acknowledge there is

a concern in the small business community that it is getting harder to access credit. We currently lend more than $500m to Australian businesses every week and have the capacity and appetite to do much more,” said van Horen.

“BizExpress can provide our eligible small business customers with a lending decision in minutes, enabling faster access to the funds they need to keep them growing.

“The nature of small businesses is such that they require quick access to funding, whether it’s to capitalise on opportunities, cover debts or cash flow, or purchase equipment.”

The bank has also been removing more business banking fees, including all electronic transaction fees, from its business accounts. Its more flexible Business Transaction Account was opened in November, offering a price option with zero monthly account fees for customers who prefer to bank online.

TOTAL FINTECH APPLICATIONS RECEIVED AND LICENSED BY APRA SINCE 2017 Source: APRA

NON-BANK LAUNCHES ‘BANKLESS’ OVERDRAFT ‘bankless’ business overdraft of non-bank lender GetCapital is seeking to establish itself as a core working capital solution for brokers, five months after launching.

Following the move of traditional banks to significantly reduce lending to small businesses, GetCapital said it saw an opportunity to offer a standalone business overdraft to serve as working capital for growing businesses of varying sizes. “GetCapital is entering a territory that has been traditionally held by banks,” said CEO Jamie Osborn.

THE

12

Total applications received

Total applications licensed

25 20 15 10 5 0

7 9 8 9 18 19 18 18 -17 19 -18 -19 l-1 -17 -18 r-1 yyl-1 l-1 vnnpt pt pt ar a Ju a a ov o u u a a e e e J J J J N M M N M M S S S

-19 ov N

Note: Since the formation of the central team and the new licensing process, there has been a considerable increase in licensing activity. A large number of fintech firms have had early contact with APRA, some of which have been granted a licence.

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17/02/2020 2:38:48 PM

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17/02/2020 2:39:31 PM

FE AT URES

SPECIAL REPORT

BUSTING THE MYTHS OF THE HOUSING MARKET Australian Broker talks to Martin North and Tim Lawless about the housing recovery across Australia, what the latest property market data suggests about housing affordability, and how brokers should communicate this to their clients

affordability and values often move in opposite directions and have done so particularly over the past decade when household income growth has been subdued and markets have moved through several cycles of both growth and decline, says CoreLogic head of research Tim Lawless.

However, CoreLogic’s national and capital city measure of housing values has been showing a strong rebound since June last year, with growth being led by Sydney and Melbourne but more recently rippling out to most of the broad regions around the country.

In fact, CoreLogic’s January results showed a broad-based rise in housing values, with every capital city and rest-of-state region recording a rise HOUSING

in values, apart from regional South Australia, where values were flat.

The CoreLogic national home value index was up by 0.9% over January, bringing the annual growth rate to 4.1% – the fastest pace of growth for a 12-month period since December 2017. According to Lawless, this demonstrates a broader recovery trend, which originally began in Sydney and Melbourne midway through 2019 and gradually spread to other areas.

Lawless says, “Housing values in Melbourne are only 1.2% away from staging a nominal recovery at the end of January, and Sydney values were 5.4% below their 2017 peak. Perth housing values look to be stabilising after posting a 21.6% decline in values between mid-2014 and late

2019, while Darwin values remain 31.8% below their 2014 peak.”

Housing recovery: Is it real?

Successive cuts to interest rates between June and October last year, the easing of serviceability rules

by APRA and the federal election outcome all combined to remove some uncertainty around taxation reform and create a sense of stability in housing; this could have been the catalyst for the recovery in housing values. “From an affordability perspective, the recent decline in housing values together with a modest rise in household incomes saw housing affordability noticeably improve,” says Lawless.

Indeed, the ratio of dwelling values to household incomes across the

combined capital cities improved from 7.57 in late 2017 to 6.75 in June 2019, with Sydney and Melbourne recording more substantial affordability improvements. Sydney’s ratio fell from 9.7 in 2017 to 8.2 in June 2019 before trending higher over the September quarter as housing values once again outpaced incomes, according to CoreLogic data. In Melbourne, the ratio fell from a recent peak of 8.4 to 7.2, but like in Sydney it is once again rising as housing values recover. In Hobart, however, housing affordability has worsened substantially due to a significant rise in housing values over the past five years, while cities like Perth and Darwin are showing relatively healthy ratios of housing values to household incomes due to the substantial fall in home values

TOP AND BOTTOM 10 SUBREGIONS’ CHANGE IN DWELLING VALUES (JAN–DEC 2019) Source: CoreLogic

16.2%

Melbourne – Inner East

13.5%

Sydney – Baulkham Hills and Hawkesbury

11.2%

-3.8%

Central Coast Adelaide – West Perth – North East

10.5%

-5.6%

Perth – South East

Sydney – Ryde

10.3%

-5.6%

Perth – North West

9.4%

Sydney – City and Inner South

8.7%

Sydney – Sutherland

8.6%

Sydney – North Sydney & Hornsby

8.4%

www.brokernews.com.au

-1.6%

Adelaide – Central & Hills

Melbourne – Inner

Sydney – Northern Beaches

14

-1.3%

12.7%

Sydney – Inner West Melbourne – Inner South

-0.9%

-5.8% -6.3% -8.1% -8.9%

Perth – South West Perth – Inner Darwin Mandurah

Tim Lawless, head of research, CoreLogic

since 2014. Lawless points out that getting a comprehensive view of housing market conditions involves more than just measuring movements in property values. This is why CoreLogic compiles a broad array of housing market analytics, he says.

“Apart from value movements and affordability measures, CoreLogic is measuring virtually every aspect of housing market performance and the factors which affect the performance of the market,” he explains.

But Martin North, principal at Digital Finance Analytics, says the CoreLogic index is “a black box”, suggesting he fails to understand how “the daily index moves even on non-trading days like Christmas”.

He says, “REA and other index providers such as Domain also run indices which do not always agree with CoreLogic’s series. For example, a few months back REA was saying Sydney prices rose 0.5% when CoreLogic says 5% – big differences.

My own analysis and conversations with valuers indicate that the local data is not always mirroring the

Martin North, principal, Digital Finance Analytics

“Mortgage stress continues to be visible across most of our household segments, with more than half of young growing families exposed” Martin North, principal, Digital Finance Analytics CoreLogic series. Despite what they say, there are some questions which have yet to be addressed.”

Lawless, however, argues that CoreLogic methodologies are well documented and completely transparent.

He says, “Our hedonic index methodology is available in the methodological document hosted on the CoreLogic website. Conversely, we would challenge anyone to find a methodological document/ summary/overview on DFA’s market observations. Not only is their household survey sampling dubious, their commentary on housing market performance appears to be

completely anecdotal.”

He continues, “We have a broad range of indices, from simple median prices and median valuations through to stratified median series, repeat sales indices, a hedonic valuation index that is also available across value-based quartiles and deciles.

“Each of these series supports a different use-case. For example, our median valuation data is used as the benchmark for affordability assessments (paired with median household income data), the stratified median series is useful for benchmarking against the ABS and Domain stratified median series, and

the repeat sales index focuses purely on the gain or loss between sales.

Our hedonic index is our flagship measure because it is designed specifically to control compositional bias or capital injection.

“We collect more than 70% of property sales data directly from the industry prior to any provision from the Valuer General in each state.

We invest more than $20m each year on our data acquisition and maintenance, which is actually more than Hometrack makes in revenue every year.”

Housing affordability Housing affordability is an issue, according to North, because brokers and consumers should not rely on high-level averages for a particular city, and, say, assume that prices in Sydney went up 5% over the quarter, “because it’s not as simple as that”.

Meanwhile, Lawless says, “It’s true that more expensive properties are recording the highest capital gains in Sydney and Melbourne – we can see this clearly in our stratified www.brokernews.com.au

15

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hedonic and decile hedonic series – but it’s incorrect to say these results are skewing the broader capital city measurements. If we were publishing an average (mean) or median based series, then this would have a skewing effect.

“The hedonic index is a portfolio valuation measure that explicitly controls for compositional change or bias in the market. It’s also important to note that our indices are available and published across smaller geographical boundaries that measure value changes across the subregions of each city – as an example, every SA4 region of Sydney has recorded a rise in dwelling values over the three months ending January, and only the Central Coast has seen a decline in values over the past 12 months.”

North adds, “The other problem is that a lot of the media which is connected to the real estate industry, which is connected to the government, want to talk prices up because growing house prices is the only economic game in town.

“If you listen to the Reserve Bank and the Treasurer, they’re all saying we need to create a wealth effect so that people spend more… and that’s good for the economy.”

According to the latest analysis by Digital Finance Analytics as at the end of January this year, mortgage stress continues to push higher, with 32.8% of households now impacted, representing more than 1.1 million borrowing Australian

(especially in Sydney and Melbourne) and rising advertised stock levels that will provide more choice and less urgency for active buyers.

“We may see improving conditions in some cities where economic and demographic trends are improving and housing remains relatively affordable; Brisbane and Perth are good examples,” he says.

But North warns that “unless there’s a significant change in the economic environment in Australia, we’re going to see greater levels of mortgage defaults in the times ahead. Recent rate cuts have helped, but household income is experiencing little to no growth since 2011 and 2012”.

He adds, “My argument is that if people are being persuaded to come into the property market on the assumption that we’re going to see a lot of price growth, I think that’s a risk – we still have a very high household debt relative to any country in the world.”

households. In addition, it’s expected that defaults will be up to more than 83,400 over the next 12 months.

Such results are no surprise, given the ongoing pressure on incomes and rising costs despite somewhat lower mortgage rates for some borrowers, says North.

He explains, “The banks, of course, are deeply discounting rates for new loans, but many borrowers are unable to access these ‘cheap’ deals and are stranded on more expensive rates. Mortgage stress continues to be visible across most of our household segments, with more than half (56%) of young growing families exposed, including a number of recent first-time buyers.

“Those in the urban fringe, especially on new estates, are also exposed (50%), but the largest cohort is in the disadvantaged fringe, where incomes are below average as well. More than 300,000 households in this group are exposed, comprising 47.2% of all households in this segment.”

While Lawless says he expects housing values to continue rising, he admits they might not rise at the same rapid pace that was witnessed over the second half of last year.

He says, “Our data is showing that housing values are still trending higher, but the rate of growth has been slowing since moving through a peak late last year.”

He suggests the main factors contributing to the slowdown are worsening housing affordability

Communicating the complexities There is no question that the housing market is dynamic and multifaceted.

Lawless suggests that “like any asset class, tracking the performance of the housing market will range from macro-level assessments through to micro-level assessments, depending on the use case”.

For example, he says policymakers will be most interested in the macro view of the market to inform areas

such as monetary policy, while small businesses and consumers will often be more interested in the specific trends in their local areas.

“CoreLogic research expands understanding of affordability using up-to-date modelled household income data from the Australian National University,” he says. “This was previously a ‘black box’ in understanding housing affordability because survey and census reporting on income data is relatively lagged.

Modelled income data allows us to understand household income relative to housing costs on a biannual basis.”

Agreeing, North says it is important to have a more holistic view of the housing market, one that includes an analysis of household income and expenditure. He says, “A lot of the information that’s out there focuses on mortgages in isolation, a loan and product perspective, whereas I focus on a household perspective. I think that’s quite important.”

For these reasons, North suggests it would be good for brokers to work with households on a realistic set of budgets. “So looking at cash flow in a lot of detail will be really important.

Don’t lend as much as you can; sometimes less is more,” he says.

“Finally, it’s really important for people to go into this with their eyes open and say that it’s not necessarily the case that we’re going to see very strong growth ahead. Set people’s expectations realistically.” AB

MORTGAGE STRESS TRENDS - TO JAN 2020 Source: Digital Finance Analytics

160

25

140

Mortgage stress (LHS), 32.8

120

20

100 15

80 60

10

40 5

Mortgage stress (LHS)

www.brokernews.com.au

CPI (LHS)

Mortgage rate (LHS)

Wage growth (LHS)

Sep-2019

Sep-2018

Mar-2019

Sep-2017

Mar-2018

Mar-2017

Sep-2016

Sep-2015

Mar-2016

Sep-2014

Mar-2015

Mar-2014

Sep-2013

Mar-2013

Sep-2012

Sep-2011

Mar-2012

Mar-2011

Sep-2010

Mar-2010

Sep-2009

Sep-2008

Cash rate (LHS)

Mar-2009

Sep-2007

Mar-2008

Mar-2007

Sep-2006

Sep-2005

Mar-2006

Mar-2005

Sep-2004

Sep-2003

Mar-2004

Mar-2003

Sep-2002

Sep-2001

Mar-2002

Mar-2001

0 Sep-2000

-5

20

Household debt (RHS)

Household debt to disposable income

180

30

0

16

200

Household debt (RHS), 186.5

Mar-2000

% borrowing owner-occupier households

35

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SPECIAL REPORT

PRIMED FOR CHANGE

Almost two years after the lender’s private equity acquisition and split from its UK parent, Bluestone’s CEO Campbell Smyth reflects on the many milestones the business has achieved in quick succession, with one eye always on what’s to come

April 2020, it will have been two years since Bluestone APAC split from its UK-based parent, Bluestone Group. As APAC CEO, I took our private equity acquisition as a heartening signal of the value Cerberus Capital Management saw in our existing operations, as well as a clear mandate for building our business into a strong, independent player in the Australian and New Zealand mortgage markets.

Looking back today, I could not be prouder of what we have achieved in such quick succession. I believe it’s fair to say that the Bluestone I lead today is unrecognisable from the Bluestone I joined almost nine years ago.

Once a specialist lender catering exclusively to credit-impaired borrowers, over the past two years we established ourselves in the near prime space before launching into prime lending in late 2019. We are now a home loan specialist that can cater to the needs of borrowers across the entire credit curve.

IN

Striking while the iron is hot There is a lot that goes into building a successful and profitable business, but I believe one of the most important things I have learned as CEO is to listen to the market and take opportunities when they come.

We have seen significant change and even upheaval in the Australian housing market over the last few years, stemming from regulatory scrutiny, international funding conditions and domestically unstable property values. These conditions created a significant opportunity for the non-bank sector, but also carried notable risks.

18

Campbell Smyth, CEO, Bluestone

At Bluestone, we took considerable care during this time to develop our products in line with market needs, while pulling back from some areas we were traditionally known for. As a result, our growth significantly outpaced others’ in the market as we expanded our presence in near prime and prime lending.

Becoming the lender for all As we started to expand into a broader loan offering, it was important for us to maintain a consistent service proposition and identity in the market. Even as our primary customer segments moved up the credit curve, I was always very clear that Bluestone should be known as a flexible home loan

provider with realistic solutions for borrowers who might not fit traditional lending boxes.

If the old Bluestone’s niche was specialist lending, I want today’s Bluestone’s niche to be home loans.

In 2020 and beyond, I want to keep growing Bluestone’s capability to be the one lender that can provide home loans to all kinds of borrowers,

www.brokernews.com.au

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whether they are buying to occupy or invest, have clear credit or not, and regardless of whether they draw income from their own business or from some form of permanent or casual employment set-up.

Customer is king To become that lender, one of our most important projects in 2019 was the launch of our new product suite, which we successfully achieved in early November. During the development phase, our priority was to use the needs of our brokers and borrowers as the key driving force for every decision we made.

The feedback we received from

our broker advisory panel was instrumental to creating the home loan suite we ultimately released to the market.

The result is a product set that is far simpler and more aligned to market needs than we have ever offered before. I had the pleasure of attending some of our early launch workshops in Sydney and Melbourne to personally introduce our new products and was thrilled to see the warm welcome we received from our brokers. This sentiment has since translated to the bottom line, as we’ve witnessed an immediate uptick in volumes across the country.

As our volumes grow, it is still of the highest importance to me and the rest of Bluestone’s leadership to keep our brokers and customers at the heart of everything we do. To this end, we welcomed James Angus in the newly created role of chief customer officer in late 2019. His focus will be on guiding Bluestone’s transition into a wholly broker- and customer-centric organisation.

Putting money where the mouth is To ensure we would reach this goal, a decision our executive team made was to implement clear KPIs for all teams across Bluestone in relation

to broker and customer satisfaction.

Since the start of the third quarter of the current financial year, a minimum of 15% of the scorecard of every team from sales to IT will relate to broker and customer experience. The goal is to ensure that every employee at Bluestone will feel they have a personal and direct stake in ensuring our service delivery is the best it can be.

Alongside this initiative, we have launched regular NPS surveys for our Australian brokers and are planning to roll these out to customers as well as the New Zealand market over 2020. In our commitment to complete transparency to the market, we were extremely pleased to share our first NPS score of 42 in November; however, we want to stress that this first result will be used merely as a baseline to measure ourselves against as we progress.

Always one eye towards the future Of course, looking to the rest of 2020 we have no intention of slowing down. Continuous growth and evolution have become the new normal at Bluestone. New exciting product innovations are already in development, and we are working hard to ensure our service delivery will continue to become faster, more consistent, and more convenient. To this end, we are pleased to announce the launch of no-cost standard upfront valuations for select customers via CoreLogic’s PropertyHub platform.

I’m also excited to go on the road again to meet more of our brokers. Under the banner ‘Thriving in Changing Times’, Bluestone held roadshows in Sydney, Melbourne and Brisbane in early February. At these events we will share some of our insights and those of other leading minds in the industry on how brokers can respond to changing market conditions to build strong, successful businesses.

The last two years at Bluestone have been a journey of ongoing change and growth both for the company and for me personally as its head. I am extremely grateful for the support we have received from our brokers throughout this time, and can’t wait to share with you all what we have in store for you in 2020. AB www.brokernews.com.au

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NE WS ANALYSIS

HOUSING MARKET TRENDS FOR 2020 Australian Broker talks to Michael Yardney, founder and CEO at Metropole Property Strategists, and Stephen Moore, Choice CEO, about the “continued confidence” in property markets and other key housing trends for the year ahead recently released its latest quarterly report comparing housing data with decade averages – or the ‘normal’ performance – for each state and territory.

In six of the states and territories, as compared to four previously, the housing finance commitments trend was above decade averages.

Additionally, in all states or territories except the NT, the home loans trend was above the levels of one year ago.

Overall, Victoria remained the best-performing economy, while Tasmania claimed the second spot, with NSW close behind. Separated by a wider margin, ACT came in fourth.

According to Michael Yardney, founder and CEO at Metropole Property Strategists, the latest finance commitments reflect the continuing confidence in property markets and increased interest from all buyer segments, but particularly owneroccupiers and first home buyers.

Yardney says, “While investor COMMSEC

“My advice for brokers is to get on the front foot and be ready to jump on business growth and opportunity” Stephen Moore, CEO, Choice activity has also picked up, it is showing milder gains and our experience at Metropole suggests this is because property investors are still finding it difficult to borrow because of the banks’ tighter lending criteria.”

However, he suggests it must be remembered that this rise in finance activity comes after a prolonged

Stephen Moore, CEO, Choice

Michael Yardley, CEO, Metropole Property

period of below-average lending that bottomed in mid-2019 before the general election.

“These figures only confirm the widely publicised property pricing data that shows the strength of the upturn in our housing markets, particularly in Sydney and Melbourne, which saw the biggest slumps in 2018–19,” Yardney says.

“Finance approvals are a leading

HOME LENDING TRENDS Source: CommSec.ABS

ACT TASMANIA

Housing finance, % change on decade average, Nov 2019 (latest)

NSW VICTORIA SOUTH AUSTRALIA QUEENSLAND

WEST AUSTRALIA NORTHERN TERRITORY -40%

20

-30%

-20%

-10%

0%

10%

20%

30%

40%

indicator and suggest that our property markets will remain strong in 2020, particularly in light of the looming shortage in the new construction activity to supply the stock required to house the growing demand.”

Choice CEO Stephen Moore says, “Both Victoria and NSW capital cities have performed well and are expected to do so throughout 2020.

Hopefully what we will see is steady growth rather than any dramatic price surges. I think we would all prefer to see steady price growth rates of around 5% rather than unsustainable jumps followed by negative growth.”

He points out that negative growth is particularly unhelpful for home loan customers given the impact on valuations, which can hinder their ability to get a better home loan deal.

He adds, “The last 12–18 months provided clear evidence of the cyclical nature of the property market and hence the lending market. In the current cycle, we are now in a period of growth in most states.

“My advice for brokers is to get on the front foot and be ready to jump on business growth and opportunity.” AB

www.brokernews.com.au

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OPINION

NAVIGATING INVESTMENT PROPERTY RISKS Nervous about investment property? Then take a leaf out of APRA’s book, says market analyst and business strategist Luke J. Graham. He explains how to take advantage of APRA’s loan serviceability calculator to determine exposure to future credit changes the course of 2015, property investors were finding it increasingly difficult to obtain finance as a result of constraints applied by APRA, notably a loan serviceability calculation against an annual interest rate of 7% or more.

At the time, Sydney was experiencing its most recent of many price booms.

According to ABS figures, December 2014 reported an almost record-breaking number of house sales in Sydney this side of the new millennium. The median house price had also increased by 9.5% over the preceding 12 months.

Sydney’s property market eventually peaked in 2017 when its median house price exceeded $1m. In large part, the city’s property price boom can be attributed to high levels of built-up demand combined with a series of RBA cash rate decreases.

price growth records were being smashed towards the end of the year. Elsewhere in Australia, the story isn’t quite the same.

This suggests that Sydney is more responsive to these changes than other markets. But why?

The prevailing sentiment over many years implies that Sydney is not only among the most unaffordable places to live in Australia but also in the world.

The city’s sensitivity to changes in the availability of credit indicates that many

Availability of credit In late 2011, the cash rate target was 4.75%.

Within two years it had plummeted to 2.5%. Passing on these rate cuts enables the annual interest bill on a $600,000 interest-only mortgage to fall by more than $13,000 each year. Alternatively, it leads to the same interest bill for an $870,000 interest-only mortgage.

Between 2012 and 2015, Sydney homebuyers appeared to have manifested the latter, with the mid-year median house price rising from $600,000 to $860,000 over that three-year period.

A correlation begins to emerge between Sydney property performance and the availability of credit.

Sydney’s sensitivity to the availability of credit is also evidenced by the triple threat of 2019: a series of cash rate decreases, combined with a favourable federal election result and the loosening of APRA’s serviceability guidelines, precipitated a resurgence of the Sydney property market.

Auction clearance rates began looking more favourable, and month-on-month

Sydneysiders are teetering on the edge of externally imposed limits of affordability.

The positive for Sydney homeowners and property investors is that 2019’s bounce-back may have direct positive consequences for their sale prices.

The negative is an awareness that any future lending restrictions could be proportionately damning.

OVER

changes to credit. The same applies to many other cities and regional centres throughout the country.

Evidence of Sydney’s unique sensitivity to credit changes can be demonstrated by the Harbour City’s recent price correction.

While Sydney’s median house price was stalling and even plummeting, Hobart, Adelaide and Brisbane were all still reporting varying levels of house price growth or stagnation despite news headlines announcing a nationwide crash.

Even though the investor may be paying a mortgage at 4.5% per annum, they could calculate whether they could afford to pay it at 7.5% per annum

Luke J. Graham is founder and market analyst at Property Analysis Australia and is currently completing postgraduate studies at Oxford University

Uncertain future Such significant levels of sensitivity to market forces may cause homeowners and property investors to be apprehensive about the future of their assets, but respect for these market forces can also be an effective tool for long-term risk mitigation.

Median household incomes in Brisbane and Sydney were comparable, with a disparity of just 12% reported during the 2016 census. One year later, during the peak of Sydney’s boom, Brisbane’s median house price was less than half of Sydney’s. With equal access to finance, this grants Brisbane a much stronger level of housing affordability and therefore greater immunity to future

My solution This analysis implies that a property investor could adopt the principle of APRA’s loan serviceability calculator to determine how exposed their own asset is to future credit changes. For instance, even though the investor may be paying a mortgage at 4.5% per annum, they could calculate whether they could afford to pay it at 7.5% per annum.

By extension, they could also calculate the level of mortgage stress a hypothetical future buyer would experience at certain purchase prices. This varies not just between cities but also between suburbs, property types and price points. It doesn’t guarantee future growth, but it certainly helps mitigate risk.

While there are many other factors that influence property performance over the long term, property price growth nevertheless boils down to the amount a buyer is both willing and capable of paying.

This simple loan serviceability calculation could help prevent a whole lot of heartache in a higher interest rate environment in the future. AB www.brokernews.com.au

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PEOPLE

Have an interesting deal?

Had a particularly difficult or interesting deal? Why not share it with us? Email:

victoria.ticha@keymedia.com

BIG DEAL

Amy Small, regional director and finance broker at Professional Lending Solutions, learns that business lending can offer some clients surprisingly huge savings in the consolidation process, even for bank-savvy clients THE FACTS

Clients Couple in their 40s with five properties

Loan size and term $1.1m for 25 years

Goal To improve cash flow

Location New Lambton

22

Aggregator Connective

limits. Overall, the clients’ loan interest rates began at 4.9% and increased to the high 6% range across their properties.

The interest rate on their credit cards was 17.99%.

The couple were worried that they would never see the end of the tunnel to paying off their properties, which was their original end goal. They had wanted to use these properties to help supplement their future retirement income.

But with that dream becoming a distant reality, they blamed themselves for getting into this position, despite many external forces outside of their control, such as their car breaking down

THE SCENARIO

I had two clients, a couple, book in with me for a debt consolidation structure.

Their aim was to take out a new loan to pay off a number of liabilities that were causing them headaches.

The clients had found my website through Facebook. They had been inspired by my education videos on debt consolidation, and their aim was to consolidate some debt to improve their cash flow, after spending many nights awake worrying about not being able to pay the bills.

The couple had no money left over at the end of the month. One of them was employed at a big bank, and while she had assumed all her rates were discounted and competitive against other banks, this was not the case.

They were in their mid-40s with two kids and four investment properties, as well as their home. One of these properties was a commercial office building with a long-term tenant and a commercial loan attached to it at a high commercial rate.

Their loan rates had started to creep up, and they were no longer happy with their current bank. Everything was paid on time, but only with minimum repayments. The couple also had two credit cards with $30,000 limits each, as well as a car lease.

Two of their loans were interest-only, but three were principal and interest, and two of their credit cards had reached their

Lender AMP

their financial situation best.

AMP had a wonderful policy that allowed a customer to consolidate a commercial loan (a loan for business purposes) and restructure it into a residential property, allowing the client to access a better residential rate. This would release the clients’ commercial property from any lending. The only drawback was that this policy had to be under 80% LVR with the remaining properties.

Luckily, the valuations came back looking fine and we could move ahead.

I was able to secure an approval with AMP and pay off the couple’s credit card debts as well.

This excited the clients – having paid off the title to one property felt like the beginning of their end goal being realised.

This meant they were able to refinance five different loans and had interest rates of 3.19% in principal and interest over a 25-year term. The whole process took about one month to secure, approve and settle.

The couple also opened five offset accounts for different purposes and were excited to see the savings.

The total consolidation meant a saving of $4,600 a month for the couple, and the funds have been funnelled back into their loans. They are now on track to pay it all off in 12 years without changing their lifestyle.

THE TAKEAWAY

The clients were happy with the overall outcome of the loan and they have referred two more families to me since then.

When I caught up with them locally, they let me know they had another

The total consolidation meant a saving of $4,600 a month for the couple. They are now on track to pay all their loans off in 12 years without changing their lifestyle

Amy Small Regional director and finance broker, Professional Lending Solutions

and then their daughter getting sick.

Initially, they thought the only solution was to get a second job to pay off their debts, or to sell one of their properties as a last resort, which was something they wanted to avoid.

THE SOLUTION

There were a few options for the client, but I thought AMP looked like it suited

$3,000 in savings built outside of the original savings figures, and that they no longer worried about not being able to pay their bills.

The key points here are that some lenders aren’t afraid of business lending, which can offer some clients huge savings in the consolidation process, but also that a broker can offer different types of solutions, even to the most bank-savvy clients. AB

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PEOPLE

MOVERS AND SHAKERS

FORMER WESTPAC EXEC JOINS LOAN MARKET

Australian Broker takes a look at some of the industry’s biggest movers and shakers at the beginning of 2020 Loan Market announced the appointment of a former Westpac executive to the newly created role of chief compliance and regulation officer. David McQueen joined the group from his previous position as head of strategy and business performance for mortgage distribution at the major bank.

McQueen has been brought on board to lead Loan Market’s preparation for the new compliance measures soon to be introduced, including the Mortgage Brokers Bill 2019 and its associated best interests duty. Given his involvement in leading Westpac’s broker channel representations during the royal commission, as well as his work with the Combined Industry Forum and the Australian Banking Association, McQueen is well suited to the role.

“In terms of best interests duty, it’s really important to view the changes IN JANUARY

as a strategic opportunity, not an onerous, box-ticking exercise,” he said.

The best interests duty will require “inward analysis of procedures and technology” to streamline the processes, according to McQueen.

“But it’s the outward execution – the on-the-ground interface between the broker and their customer – where brokers are going to display their real value in 2020,” he added.

“I’m a great believer that risk and compliance if designed and executed well is a competitive advantage – and that’s what we’re preparing our brokers for.”

Technology will be the key to allowing brokers to remain focused on customers while also meeting their compliance obligations.

“With MyCRM, Loan Market’s technology solution, brokers are in a really strong position to reinvent the experience they offer clients with limited disruption,” said McQueen. AB

WESTPAC NAMES NEW CHIEF EXECUTIVE has announced the appointment of its new non-executive director and chairmanelect, who will play an integral role in the appointment of a permanent CEO following the resignation of Brian Hartzer.

John McFarlane, who is scheduled to assume the role this month subject to regulatory approvals, will succeed Lindsay Maxsted and work closely with Peter King, the current acting CEO. McFarlane has more than 44 years’ experience in financial services across retail and wholesale banking and markets, as well as in life and general insurance. Most recently, McFarlane was chairman of Barclays in London over “the decade of challenge” following the GFC. WESTPAC

John McFarlane, non-executive director and chairman-elect, Westpac

24

David McQueen, chief regulation and compliance officer, Loan Market

MYSTATE ANNOUNCES CHANGE TO LEADERSHIP managing director and CEO of a financial services group with a flourishing loan book has announced his resignation upon the completion of his contract. Melos Sulicich will be leaving Tasmania-based MyState Limited in July 2020. According to chairman Miles Hampton, Sulicich has had a significant impact on the business since joining the company in 2014 from his former role as GM of mortgage distribution at Westpac. Sulicich’s resignation was due to his decision to permanently relocate to Sydney after almost six years living away from his family. He described his time leading the group as “a privilege” Melos Sulicich, managing director and expressed his appreciation to the and CEO, MyState entire staff at MyState.

THE

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PEOPLE

CAUGHT ON CAMERA FAST recently held its annual Professional Development Convention in Sydney. Opening the two-day event, FAST CEO Brendan Wright spoke about transformation and change in business, and building a value-creating culture. Leadership, diversity and inclusion were also important themes addressed by Wright and several other speakers at the event. The convention included high-profile speakers such as The Hon. Julie Bishop, who spoke about the importance of reputation and trust, and Saroo Brierley, author of the international bestselling autobiography A Long Way Home, whose story was brought to life in the motion picture Lion. Brokers also heard from NAB CCO Mike Baird, Combined Industry Forum chair Anthony Waldron and MFAA CEO Mike Felton.

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DATA

NEWS SOUTH WALES

TAS SPOTLIGHT

Growth corridor in southwest NSW continues to expand Research by the Dahua Group shows that the city of Campbelltown has been growing rapidly, spurred by infrastructure development. Bardia, Ingleburn and Bradbury are some of the suburbs reaping rewards from this growth.

Over in the Hunter region, the major regional centre of Newcastle has earned the distinction of being the first city to make the move to 100% renewable energy. The region has been moving in this direction for a while, with several projects focusing on renewable energy development. Such initiatives could be a factor stimulating economic growth in the district, which makes procuring land in low-density areas with growth potential crucial.

“There has been substantially more land released for low-density [housing] in growth corridors of major cities. As a result, we’ve seen the uptick in first home buyers,” says Michelle Ciesielski, head of residential research at Knight Frank. “Vertical site sales have been more prevalent in NSW with the new legislation for strata properties coming into operation in late 2016.”

Area

Type Median value

Quarterly

12-month

growth

growth

Sydney

H

$885,000

-1.1%

-7.0%

NSW Country

H

$472,500

0.8%

-0.2%

Sydney

U

$691,000

-0.7%

-4.1%

NSW Country

U

$410,000

0.0%

1.2%

VICTORIA

Melbourne market sustains demand as a result of population growth Melbourne continues to see demand stimulated by population growth and its stable economy and job market, which helped to cushion the city through its decline, according to the CoreLogic Home Value Index for October 2019. With that period now over, Melbourne’s inner-city suburbs have rebounded, reporting the highest levels of growth among capital city subregions.

With dwelling values on the up again, homebuyers may be looking to the unit market for affordable options. People’s Choice Credit Union identified a number of suburbs in its People’s Choice of Housing report that represented the most affordable and liveable unit markets; pockets like Hawthorn East, Murrumbeena, Surrey Hills and Glen Iris topped the list given their convenient locations near cities, job availability, low crime rates and accessibility via public transport. Limited supply is expected to keep demand strong, especially in the rental market. OpenCorp director Matthew Lewison says, “Melbourne has a lower vacancy rate so is likely to see evidence of a shortage before Sydney.”

Area

Type Median value

Quarterly

12-month

growth

growth

Melbourne

H

$700,000

-0.7%

-4.8%

VIC Country

H

$370,000

1.8%

4.5%

Melbourne

U

$555,000

2.1%

1.5%

VIC Country

U

$290,000

3.7%

3.7%

26

TASSIE REGIONS BLOSSOM

The island state’s regional property markets are still reporting strong growth, while Hobart is falling behind other capital cities

property markets were in a much stronger position towards the end of 2019 than in previous months, except for those in its capital city, according to CoreLogic data as at 30 November.

While Hobart began last year as the top capital city market in Australia, it was expected to end the year in fifth place.

Although the city is still holding on to positive growth, its quick descent down the ranks is not a great sign for the year ahead.

But outside the metro, the Launceston region is continuing to blossom. Among the non-capital city subregions in Australia, this market reported the highest growth over the October quarter, at 4.7%.

Affordability also remains a significant advantage for the Apple Isle, driving demand in the face of low stock.

“Total advertised stock levels are 11% lower relative to [2018] and tracking at the TASMANIA’S

lowest level since 2010. Such a small pool of available stock against rising buyer demand is creating some competitive pressure amongst buyers, which is adding to urgency in the market and supporting upwards pressure on values,” says CoreLogic head of research Tim Lawless.

“Hobart land prices have rocketed 20.3% higher over the year ending June, reflecting tight supply against a backdrop of strong demand. Despite the significant rise, Hobart is still showing the lowest median land price amongst the capital cities, at $180,000, and the largest median land area at 624sqm.”

Nonetheless, Hobart will need to be careful to balance supply and demand as it’s at risk of losing its trump card.

“Lower land prices should provide further support for housing affordability in these markets; however, in Hobart and Perth, land prices were higher,” Lawless points out. AB

OPPORTUNITIES AND KEY INFRASTRUCTURE

$95m

$46.4m

Value of infrastructure projects kicking off over the next 18 months

Separate funds announced by the government to improve Bass Highway

$45m

$478,250

Funding for the Hobart to Sorell Corridor, including the Hobart Airport Interchange

Median price of a house in Launceston

SUBURB TO WATCH: HUONVILLE Median price (houses) $395,569

Median price (units) $241,823

12-month growth

3-year growth

5-year growth

Indicative gross rental yield

2.4%

31.8%

44.7%

5.2%

12-month growth

3-year growth

5-year growth

Indicative gross rental yield

0.3%

36.2%

26.9%

5.0%

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AUSTRALIAN CAPITAL TERRITORY

The nation’s capital is one of the leaders of the housing market recovery The findings of Knight Frank’s Australian Residential Development Review suggest that Canberra is one of the markets leading the charge. After Sydney and Melbourne, its units in high-density sites reported the highest indicative rate of $92,500 per apartment.

What makes Canberra such a consistently strong market, even holding on through the downturn that affected Sydney and Melbourne, is its focus on the long term, supported by a strong economy and job market. While it is traditionally known for openings in the public sector, Canberra has been moving towards private sector employment as well so that employment opportunities are not fully dependent on political movements.

“Canberra is a national frontrunner when it comes to employment, recording the highest annual employment growth nationally of 3.4%. It also has the lowest unemployment rate nationally of 3.3%,” says Sam Dodimead, director of project marketing at Peter Blackshaw Real Estate. As a result of job availability, Canberra has experienced steady population growth year-on-year.

Area

Type Median value

Quarterly

12-month

growth

growth

Canberra

H

$650,000

-0.5%

2.0%

Canberra

U

$420,000

-1.2%

-0.5%

SOUTH AUSTRALIA

Sunny Adelaide continues to shine with positivity

HIGHEST-YIELD SUBURBS IN TASMANIA Suburb

Weekly median

Type

Median price

Quarterly growth

12-month growth

Queenstown

H

$79,000

9%

8%

$150

10%

Rosebery

H

$87,500

-1%

17%

$150

9%

Zeehan

H

$100,000

15%

25%

$163

8%

Gagebrook

H

$213,000

1%

12%

$330

8%

Herdsman Cove

H

$220,000

2%

9%

$330

8%

Bridgewater

U

$195,000

0%

4%

$290

8%

Rocherlea

H

$175,000

5%

14%

$250

7%

Clarendon Vale

H

$246,000

7%

17%

$350

7%

advertised rent

Gross rental yield

Mayfield

H

$181,000

-3%

9%

$255

7%

George Town

H

$182,000

1%

14%

$253

Ravenswood

H

$180,500

0%

7%

New Norfolk

U

$242,500

7%

13%

Real Estate Institute of SA president Brett Roenfeldt says investors have nothing to worry about when it comes to this state, with affordability shining even more light on the capital.

“The third quarter is always traditionally a slow period for sales, and these results are comparable to the same quarter in previous years,” he explains.

“The great news is that the median price continues to remain high, and this is surely a sign of the underlying confidence and resilience of our property market. The figures also show that realistically and transparently priced properties continue to sell well. Purchasers are willing to pay a price that is affordable and realistic. SA will always be one of the best places in the world to live, work, invest and enjoy a great lifestyle.”

With a median house price of under $500,000, the suburb of Glenalta in the southern foothills of Adelaide was highlighted by the People’s Choice of Housing report as Adelaide’s “most affordable and liveable suburb”.

Area

Type Median value

Quarterly

12-month

growth

growth

Adelaide

H

$465,000

1.1%

2.9%

7%

SA Country

H

$275,000

1.9%

5.8%

$250

7%

Adelaide

U

$335,000

0.0%

1.5%

$330

7%

SA Country

U

$226,500

9.7%

10.3%

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DATA

QUEENSLAND

Queensland’s best markets are found outside the metro According to CoreLogic’s Home Value Index, the property price increase of 1.1% in Brisbane over the three months to October 2019 was the city’s most positive since December 2015. However, outside the capital, Mackay-Isaac-Whitsunday, Gold Coast and Cairns were three of the top regional markets in the country. AllianceCorp founder Jason Paetow highlighted a number of suburbs that he expected to stand out in 2020, and one of these lies within the Sunshine Coast, arguably the strongest market in the Sunshine State.

“Maroochydore is a suburb with low median property prices, stunning beaches and plenty of infrastructure development,” he says. “Projects in the area include the Sunshine Coast International Airport expansion, the University Hospital and the proposed light rail facility – construction could commence by 2025.”

Rental demand is expected to increase further given the proximity of the Sunshine Coast University and TAFE campus. The university also looking to establish a campus within the Maroochydore CBD. Quarterly

12-month

growth

growth

Brisbane

H

$535,000

0.0%

0.9%

QLD Country

H

$440,000

0.0%

-1.6%

Brisbane

U

$390,000

0.3%

-0.5%

QLD Country

U

$369,000

0.0%

-1.3%

WESTERN AUSTRALIA

102

Cleared

31

Uncleared

23

Clearance rate

57.4%

PERTH Total auctions

21

Cleared

3

Uncleared

4

Clearance rate

42.9%

Units

Quarterly

12-month

growth

growth

H

$470,000

-1.0%

-3.0%

WA Country

H

$315,000

-1.5%

-1.5%

Perth

U

$370,000

-0.9%

-6.4%

WA Country

U

$195,000

-4.5%

-5.0%

$0 Sydney

Melbourne Brisbane Adelaide

Perth

Hobart

Darwin

$447,500

$630,750 $352,500

$461,250

$375,000

$540,000

$375,000

$430,000

$100,000

$300,000

$200,000

$450,000

$300,000

$353,000

$400,000

$508,000

$500,000

$511,000

$700,000 $600,000

$630,500

$800,000

Perth

28

Total auctions

Houses

Knight Frank’s Australian Residential Development Review report for the second half of 2019 indicated that while the average value of a unit in a highdensity site (excluding CBDs across cities) in Australia was $84,300, in Greater Perth it was just $50,200. The value of a standard new apartment was $8,200 per square metre as of June 2019, while in the inner suburbs of Perth buyers could get units for as little as $6,000/sqm. Those in the middle ring came in at an indicative rate of $7,200/sqm, and apartments on the outskirts went for an average of $6,100/sqm.

For those on the lookout for the best places to purchase units, the report highlights Perth, Claremont, Subiaco, West Perth, South Perth, Burswood, East Perth, Mount Pleasant, Menora and Scarborough as the top 10 suburbs to buy in. Low interest rates, relaxed credit policies and greater buyer confidence have helped to strengthen the performance of the national housing market.

Type Median value

ADELAIDE

MEDIAN HOUSE AND UNIT PRICES

Positive indicators suggest Perth will bounce back

Area

The first week of auction reporting for 2020 saw 608 capital city homes taken to auction, returning a preliminary auction clearance rate of 65.5%. In the same week last year, the combined capital city preliminary clearance rate came in at 47.8%, before revising down to a 42.8% final clearance rate. However, according to CoreLogic, it is likely this week’s clearance rates will see the usual downward revision as final results are collected. It is important to note that volumes are significantly lower than at the end of last year, and clearance rates are generally less indicative over periods of such low activity.

As the number of auctions held increases over the next few weeks we will be able to get a better view of auction conditions for 2020.

Looking at results across the individual capital cities, Sydney returned the strongest preliminary clearance rate of 77.4% across 151 auctions. However, it was Melbourne that saw the highest number of homes auctioned, with 208 auctions held, returning a preliminary clearance rate of 67.7%.

$621,055

Type Median value

WEEK ENDING 2 FEBRUARY 2020

$735,000

Area

CAPITAL CITY AUCTION CLEARANCE RATES

Canberra

CAPITAL CITY HOME VALUE CHANGES Capital city

Weekly change

Monthly change

Year-to-date change

12-month change

Sydney

0.3%

1.0%

1.2%

8.1%

Melbourne

0.3%

1.0%

1.3%

8.5%

Brisbane

0.1%

0.5%

0.5%

1.1%

Adelaide

0.1%

0.3%

0.3%

0.5%

Perth

0.1%

0.1%

0.1%

-5.7%

Combined 5 capitals

0.2%

0.8%

1.0%

5.4%

*The monthly change is the change over the past 28 days

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BRISBANE Total auctions

CANBERRA Total auctions

69

Cleared

24

Uncleared

10

Clearance rate

50

Cleared

9

Uncleared

13

Clearance rate

40.9%

70.6%

SYDNEY Total auctions

151

Cleared

72

Uncleared

21

Clearance rate

77.4%

TASMANIA

MELBOURNE Total auctions

208

Total auctions

7

Cleared

109

Cleared

2

Uncleared

52

Uncleared

2

Clearance rate

Clearance rate

67.7%

NORTHERN TERRITORY

Area

Despite some improvements, Darwin is still trailing behind other capital city markets Even though Darwin escaped being ranked as the weakest-performing capital in the country by CoreLogic’s Home Value Index for October 2019, those who are looking for capital growth in their NT investments may have a while to wait before they see the benefits. For example, the Alice Springs region saw sales volumes plummet by 7.9%. However, its median value did increase by 2.9%. The median value in the Greater Darwin market was 16.6% lower compared to September 2018. Rental yields have also begun to drop: in previous months, Darwin’s average rental return hovered at around 6%, but it has now slipped to 5.8%. The city also had the biggest decrease in rental rates of all the capitals. This could in part be the result of renters deciding to become homeowners in the wake of lower mortgage rates.

N/A

Type

Median value

Quarterly growth

12-month growth

Darwin

H

$450,000

-2.6%

-3.5%

NT Country

H

$423,500

-0.6%

-3.4%

Darwin

U

$300,000

-3.2%

-12.2%

NT Country

U

$327,000

1.1%

-1.1%

All data sourced from CoreLogic.com.au

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PEOPLE

IN THE HOT SEAT

Mark Middleton, head of third party distribution at Teachers Mutual Bank Limited, discusses some of his top survival tips for working in finance, and his ambitions for the year ahead

What attracted you to working for one of Australia’s largest mutual banks? spent 28 years at a major bank and then decided I wanted a new A Ichallenge; I wanted to assist a financial institution that had strong values and a focus on sustainability with its overall growth and ambitions. Over my career, I had developed a large variety of skills as I took on a wide range of projects, including developing, implementing and leading the industry specialisation unit as well as the commercial broking arm. I knew I wanted to use these skills in my next role, which led me to Teachers Mutual Bank.

Q

What are your top survival tips for working in finance?

Having diverse skills, not being afraid to ask questions, and A reading daily – that keeps you in touch with what’s happening in the market. But, lastly and most importantly, having a sense of humour.

Q

How important is it to support key workers and their families, and what can brokers do to help more in this area? have four brands that represent key worker groups in our A We community – Firefighters Mutual Bank, Health Professionals Bank, Teachers Mutual Bank for the education sector and UniBank for the university sector. These people do amazing work, and it’s important they are represented. Having these four brands provides an opportunity for brokers to grow in these niches by offering solutions designed for their clients’ workforces. It’s important brokers are aware of niche opportunities, as well as how we reinvest profits to provide competitive products and services, and understand that this is very attractive to the communities represented by our different brands.

Q

What’s one of your recent career highlights?

Honestly, it’s working in the broking industry right now – I really A enjoy coming to work every day. I enjoy the people I work with in my team, as well as the brokers, aggregators and industry groups I’m interacting with. It might be corny, but it’s the truth!

Q

What’s one thing, personal or professional, that you hope to achieve in 2020?

I’d really like to get back to work after recently rupturing my A Achilles. I’m looking forward to working with my team to review and implement changes for the benefit of both brokers and their clients. AB

Q

30

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